Government transfer payments are income earned by individuals who work for the federal government.

2.2 "Supply-Side" Economics

What will be an ideal response?

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00 . Taking these four transactions into account, what is the effect on GDP?

a. GDP increases by $3.00. b. GDP increases by $5.00. c. GDP increases by $6.00. d. GDP increases by $7.00.